A few years ago, my daughter came home from school and told us about a special assembly discussing cyberbullying. She was very focused on how people could take embarrassing pictures and quickly send them out with their smartphones. She wanted to know if smartphones were "bad." This led to a discussion about the difference between a "tool", which can be used for both positive and negative purposes but is inherently amoral, as opposed to the implementer of the tool who can deploy it in a multitude of ways.
A tool is usually defined as an implement which facilitates mechanical operations. In public finance, tools are used to process fiscal operations, monitor revenues and expenditures, and identify economic trends. While these tools can provide information to inform decision makers, they do not magically make policy decisions or increase efficiency and effectiveness.
Zero-Based Budgeting (ZBB) is a tool with many iterations and one fundamental similarity – building an annual budget starting from zero, rather than just adding or subtracting from the previous year's baseline as most governments tend to do. ZBB was copied from the private sector in the 70's and has been credited and/or blamed for varying levels of success and failure since that time. When applied seriously, ZBB allows government to identify how it spends money without the prejudice of "that's the way it has always been done." However, the tool does not force leaders to act on that new information.
In Montgomery County, ZBB was introduced in 2012, and was the core tool for developing the 2013 County budget. The process was (and continues to be) successful, because the County Commissioners took the data that emerged, and made difficult choices about spending priorities which challenged long-held, but unsubstantiated, practices. Even though some of those decisions challenged personal core ideologies, they adopted policies based on the facts that emerged from the ZBB process.
Performance Based Budgeting, Program Budgeting, and numerous other budgeting approaches are similar to ZBB in that they are tools which produce valuable data, but are not automatic paths to success. This reality is not limited to budgeting tools. Deferred Retirement Option Programs (DROP) were developed to provide a government with a desperately needed succession planning tool. DROP was used successfully in several locations, even as it continues to be abused in Philadelphia and elsewhere.
Interest rate SWAPs can be valuable tools for managing large debt portfolios by sophisticated parties, but governments are still paying for their misuse in the mid-2000's by public officials who were looking for short-term cash without understanding the risk. Philadelphia and Montgomery County are just two of the governments in the state who continue to struggle with debt tied up in SWAPs; according to a Bloomberg report, Pennsylvania has more such challenges than any other state in the US, with $17 billion worth of public debt tied up in SWAP deals.
The list of tools utilized across the public finance spectrum would take a book to discuss, but they do have a common theme. They are too often branded as inherently "good" or "evil" in order to distract attention away from the role of the implementer. Good public leadership is the result of individuals who use some or all of these tools to evaluate the choices they face, and then have the willingness to act accordingly.
Tools are inanimate objects or concepts. Their success or failure is dependent on those who wield them.
Chief Financial Officer
Montgomery County, PA